Deficit, Seigniorage and the Growth Laffer Curve in developing countries

The endogenous growth literature has established the existence of an inverted-U curve between taxes and economic growth, namely a Growth Laffer Curve (GLC). We develop a growth model with public investment as the engine of perpetual growth, and look for the effect of deficit, tax and money financing on economic growth. We study in particular the way fiscal and monetary policies (through deficit and seigniorage respectively) deform the GLC. An empirical section based on a panel of developing countries provides GMM-system estimators that support our theoretical conclusions.Growth Laffer Curve;deficit;seigniorage;developing countries;GMM;panel data

Un Réexamen de la Non-linéarité entre le Développement Financier et la Croissance Economique

Cet article présente un modèle simple de croissance endogène dans lequel le secteur financier améliore l\u27efficacité de la transformation de l\u27épargne en investissement. Le modèle fait apparaître l\u27existence de trajectoires multiples de croissance endogène à long terme, et la possibilité d’une relation non linéaire entre le développement financier et la croissance, le niveau de développement financier exerçant un effet de seuil dans cette relation. Les tests empiriques réalisés selon la méthode PSTR (Panel Smooth Threshold Regression) sur un panel de 71 pays sur la période 1960-2006 confirment cet effet de seuil : la relation entre développement financier et croissance est positive lorsque le développement financier est relativement faible, mais son signe devient difficile à déterminer dans les pays financièrement développés. Cet effet de seuil est corroboré lorsque l’endogénéité du développement financier est prise en compte à l’aide de la méthode des moments généralisés (GMM) sur panel dynamique

A Simple Endogenous Growth Model of Financial Intermediation with Multiplicity and Indeterminacy

This paper analyzes the role of financial intermediation in a simple endogenous growth model. The results suggest that multiple endogenous growth paths can exist in connection with various levels of financial development, due to the reciprocal externality between financial and real sectors. According to multiplicity, the growth effects of shocks on the technology of intermediation are opposite, depending on the balanced growth path. Furthermore, transitional dynamics is examined, and reveals that the high equilibrium is a saddle path, while the low-growth is locally stable. Therefore, the model presents local and global indeterminacy. These theoretical results support the large empirical literature on the relationship between financial development and growth which depicts conflicting impacts

Deficit, monetization, and economic growth: a case for multiplicity and indeterminacy

This paper develops an original analysis of deficit monetization in a growth model with transaction costs, in which economic growth interacts with productive public expenditures. This interaction generates two positive balanced growth paths (BGP) in the long run: a high BGP and a low BGP. The transitional dynamics show that multipl

Investment and the rate of profit in a financial context: the French case

The growth regime prevailing in France since the middle of the 1980s allowed for a recovery of profitability, yet without durable resumption of growth or accumulation of fixed capital. The financialization of this growth regime shows on both the asset and liability sides of the balance sheets. Following a post‐Keynesian framework, we analyse and test the main determinants of real investment and financial capital accumulation for non‐financial companies in France, based on data from the flow‐of‐funds accounts. This analysis points to an arbitrage, prevailing between real and financial accumulation, as a key reason explaining the insufficient recovery of investment.finance, investment, profit rate, growth regime, G11, E12, E22, C32,